Sun Communities, Inc. Reports 2019 First Quarter Results

Southfield, MI, April 24, 2019 (GLOBE NEWSWIRE) --  Sun Communities, Inc. (NYSE: SUI) (the “Company”), a real estate investment trust (“REIT”) that owns and operates, or has an interest in, manufactured housing (“MH”) and recreational vehicle (“RV”) communities, today reported its first quarter results for 2019.

Financial Results for the Three Months Ended March 31, 2019

For the three months ended March 31, 2019, total revenues increased $29.4 million, or 11.4 percent, to $287.3 million compared to $258.0 million for the same period in 2018. Net income attributable to common stockholders was $34.3 million, or $0.40 per diluted common share, for the three months ended March 31, 2019, as compared to net income attributable to common stockholders of $30.0 million, or $0.38 per diluted common share, for the same period in 2018.

Non-GAAP Financial Measures and Portfolio Performance

• Core Funds from Operations (“Core FFO”)⁽¹⁾ for the three months ended March 31, 2019, was $1.18 per diluted share and OP unit (“Share”) as compared to $1.14 in the prior year, an increase of 3.5 percent.
   
• Same Community⁽²⁾ Net Operating Income (“NOI”)⁽¹⁾ increased by 7.2 percent for the three months ended March 31, 2019, as compared to the same period in 2018.
   
• New home sales volume increased 17.9 percent for the three months ended March 31, 2019, as compared to the same period in 2018.

Gary Shiffman, Chief Executive Officer of Sun Communities, stated, “Our solid momentum has continued as we started the year with strong operating results and numerous investments. We delivered another quarter of robust same community NOI growth, which along with our recent investments and expansions, contributed to our outperformance. Our extensive history of providing first-rate amenities and a focus on customer service continues to draw sustained demand. We remain confident in our outlook, maintain an attractive growth pipeline and anticipate the continued realization of the benefits of our developments and expansion opportunities as we bring them online over time.”

 

OPERATING HIGHLIGHTS

Community Occupancy

Total portfolio occupancy was 96.4 percent at March 31, 2019, compared to 95.8 percent at March 31, 2018.

During the three months ended March 31, 2019, revenue producing sites increased by 571 sites, as compared to 616 revenue producing sites gained during the first quarter of 2018.
Same Community⁽²⁾ Results

For the 345 communities owned and operated by the Company since January 1, 2018, NOI⁽¹⁾ for the three months ended March 31, 2019, increased 7.2 percent over the same period in 2018, as a result of a 6.0 percent increase in revenues and a 3.1 percent increase in operating expenses. Same Community occupancy⁽³⁾ increased to 98.2 percent at March 31, 2019 from 96.1 percent at March 31, 2018.

 

Home Sales

During the three months ended March 31, 2019, the Company sold 798 homes as compared to 837 homes sold during the same period in 2018, a 4.7 percent decrease. Rental home sales, which are included in total home sales, were 210 and 234 for the three months ended March 31, 2019 and 2018, respectively.

 

PORTFOLIO ACTIVITY

Acquisitions

During the quarter ended March 31, 2019, the Company acquired the following communities:

First Quarter 2019:
Date of Acquisition	Type	Location	Usable Sites		Consideration  (in Millions)
1/2019	MH (Age Restricted)	Edgewater, Florida (1)	730		$	115.3
1/2019	RV	Old Orchard Beach, Maine	321			10.8
1/2019	MH	Oregon City, Oregon(2)	518			61.8
2/2019	MH	Buckeye, Arizona	400			22.3
2/2019	MH (3)	Shelby Township, Michigan	1,308			94.5
2/2019	RV	Millsboro, Delaware	291			20.0
		Total	3,568		$	324.7

⁽¹⁾ Acquisition includes expansion potential of 70 sites.
⁽²⁾ In conjunction with the acquisition, the Company issued a new class of Operating Partnership (“OP”) units named Series D Preferred Units. As of March 31, 2019, 488,958 Series D Preferred OP Units were outstanding.
 ⁽³⁾ Contains two MH communities.

 

BALANCE SHEET AND CAPITAL MARKETS ACTIVITY

Debt Transactions

During the quarter ended March 31, 2019, the Company completed a $265.0 million twenty-five year term loan transaction which carries an interest rate of 4.17 percent and concurrently repaid a $186.8 million term loan. The transaction provided $78.2 million of additional proceeds and extended the maturity date from 2030 to 2044 using the same assets as collateral for the new loan.

As of March 31, 2019, the Company had $3.4 billion of debt outstanding. The weighted average interest rate was 4.39 percent and the weighted average maturity was 9.3 years. The Company had $21.9 million of unrestricted cash on hand. At period-end the Company’s net debt to trailing twelve month Recurring EBITDA⁽¹⁾ ratio was 6.0 times.

2019 Distributions

As previously announced, the Company increased its annual distribution by 5.6 percent to $3.00 per common share from $2.84 per common share. The increase began with the distribution declared in March 2019 that was paid after quarter end.

 

GUIDANCE 2019

The Company revises full year 2019 net income per diluted share to be in the range of $1.61 to $1.71 and Core FFO⁽¹⁾ per Share to be in the range of $4.80 to $4.88. The Company anticipates second quarter 2019 net income per diluted share to be in the range of $0.31 to $0.35 and Core FFO⁽¹⁾ per Share to be in the range of $1.11 to $1.14. The Company is revising its Same Community NOI⁽¹⁾ growth guidance to be in the range of 6.4 percent to 7.0 percent for full year 2019.

Guidance estimates include acquisitions completed through the date of this release and exclude any perspective acquisitions or capital markets activity.

Core FFO⁽¹⁾ per Share estimates assume certain gain and loss items that management considers unrelated to the operational and financial performance of our core business will be adjusted from FFO⁽¹⁾. The estimates and assumptions presented above represent a range of possible outcomes and may differ materially from actual results. The estimates and assumptions are forward looking based on the Company’s current assessment of economic and market conditions, as well as other risks outlined below under the caption “Forward-Looking Statements.”

 

EARNINGS CONFERENCE CALL

A conference call to discuss first quarter operating results will be held on Thursday, April 25, 2019 at 11:00 A.M. (ET). To participate, call toll-free 877-407-9039. Callers outside the U.S. or Canada can access the call at 201-689-8470. A replay will be available following the call through May 9, 2019 and can be accessed toll-free by calling 844-512-2921 or 412-317-6671. The Conference ID number for the call and the replay is 13688595. The conference call will be available live on Sun Communities’ website www.suncommunities.com. The replay will also be available on the website.

Sun Communities, Inc. is a REIT that, as of March 31, 2019, owned, operated, or had an interest in a portfolio of 379 communities comprising over 132,000 developed sites in 31 states and Ontario, Canada.

For more information about Sun Communities, Inc., please visit www.suncommunities.com.

CONTACT

Please address all inquiries to our investor relations department at our website www.suncommunities.com, by phone to [phone], by email to [e-mail] or by mail to Sun Communities, Inc. Attn: Investor Relations, 27777 Franklin Road, Ste. 200, Southfield, MI 48034.

 

Forward-Looking Statements

This press release contains various “forward-looking statements” within the meaning of the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended, and the Company intends that such forward-looking statements will be subject to the safe harbors created thereby. Forward-looking statements can be identified by words such as “will,” “may,” “could,” “expect,” “anticipate,” “believes,” “intends,” “should,” “plans,” “estimates,” “approximate,” “guidance,” and similar expressions in this press release that predict or indicate future events and trends and that do not report historical matters.

These forward-looking statements reflect the Company’s current views with respect to future events and financial performance, but involve known and unknown risks, uncertainties, and other factors, some of which are beyond the Company’s control. These risks, uncertainties, and other factors may cause the actual results of the Company to be materially different from any future results expressed or implied by such forward-looking statements. Such risks and uncertainties include national, regional and local economic climates, the ability to maintain rental rates and occupancy levels, competitive market forces, the performance of recent acquisitions, the ability to integrate future acquisitions smoothly and efficiently, changes in market rates of interest, changes in foreign currency exchange rates, the ability of manufactured home buyers to obtain financing and the level of repossessions by manufactured home lenders. Further details of potential risks that may affect the Company are described in its periodic reports filed with the U.S. Securities and Exchange Commission, including in the “Risk Factors” section of the Company’s Annual Report on Form 10-K.

The forward-looking statements contained in this press release speak only as of the date hereof and the Company expressly disclaims any obligation to provide public updates, revisions or amendments to any forward-looking statements made herein to reflect changes in the Company’s assumptions, expectations of future events, or trends.

 

Investor Information                                                            

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RESEARCH COVERAGE
Firm		Analyst		Phone		Email
Bank of America Merrill Lynch		Joshua Dennerlein		[phone]		[e-mail]
BMO Capital Markets		John Kim		[phone]		[e-mail]
Citi Research		Michael Bilerman		[phone]		[e-mail]
		Nicholas Joseph		[phone]		[e-mail]
Evercore ISI		Steve Sakwa		[phone]		[e-mail]
		Samir Khanal		[phone]		[e-mail]
Green Street Advisors		John Pawlowski		[phone]		[e-mail]
RBC Capital Markets		Wes Golladay		[phone]		[e-mail]
Robert W. Baird & Co.		Drew Babin		[phone]		[e-mail]
Wells Fargo		Todd Stender		[phone]		[e-mail]
INQUIRIES
Sun Communities welcomes questions or comments from stockholders, analysts, investment managers, media, or any prospective investor. Please address all inquiries to our Investor Relations department.
At Our Website		www.suncommunities.com
By Email		[e-mail]
By Phone		[phone]

 

Portfolio Overview                                                                           
(As of March 31, 2019)

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Balance Sheets                                                                                                                                              
(amounts in thousands)

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		3/31/2019				12/31/2018
ASSETS:
Land		$	1,279,306			$	1,201,945
Land improvements and buildings		5,899,149				5,586,250
Rental homes and improvements		585,994				571,661
Furniture, fixtures and equipment		208,177				201,090
Investment property		7,972,626				7,560,946
Accumulated depreciation		(1,501,370		)		(1,442,630		)
Investment property, net		6,471,256				6,118,316
Cash and cash equivalents		21,946				50,311
Marketable securities		50,501				49,037
Inventory of manufactured homes		52,993				49,199
Notes and other receivables, net		179,814				160,077
Collateralized receivables, net (4)		101,938				106,924
Other assets, net		220,214				176,162
TOTAL ASSETS		$	7,098,662			$	6,710,026
LIABILITIES AND TEMPORARY EQUITY:
Mortgage loans payable		$	2,879,017			$	2,815,957
Secured borrowings (4)		102,676				107,731
Preferred Equity - Sun NG Resorts - mandatorily redeemable		35,249				35,277
Preferred OP units - mandatorily redeemable		34,663				37,338
Lines of credit (5)		396,512				128,000
Distributions payable		66,887				63,249
Advanced reservation deposits and rent		151,860				133,698
Other liabilities		179,461				157,862
TOTAL LIABILITIES		3,846,325				3,479,112
Commitments and contingencies
Series A-4 preferred stock		31,739				31,739
Series A-4 preferred OP units		9,784				9,877
Series D preferred OP units		51,738				—
Equity Interests - NG Sun LLC		22,167				21,976
STOCKHOLDERS' EQUITY:
Common stock		865				864
Additional paid-in capital		4,398,641				4,398,949
Accumulated other comprehensive loss		(3,006		)		(4,504		)
Distributions in excess of accumulated earnings		(1,317,605		)		(1,288,486		)
Total Sun Communities, Inc. stockholders' equity		3,078,895				3,106,823
Noncontrolling interests:
Common and preferred OP units		51,816				53,354
Consolidated variable interest entities		6,198				7,145
Total noncontrolling interests		58,014				60,499
TOTAL STOCKHOLDERS' EQUITY		3,136,909				3,167,322
TOTAL LIABILITIES, TEMPORARY EQUITY AND STOCKHOLDERS' EQUITY		$	7,098,662			$	6,710,026

Statements of Operations - Quarter to Date Comparison                                                            
(amounts in thousands, except per share amounts)

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	Three Months Ended March 31,
	2019				2018				Change				% Change
REVENUES:
Income from real property (excluding transient revenue)	$	190,564			$	175,210			$	15,354			8.8	%
Transient revenue	26,215				22,001				4,214				19.2	%
Revenue from home sales	39,618				34,900				4,718				13.5	%
Rental home revenue	13,971				13,020				951				7.3	%
Ancillary revenue	8,482				6,568				1,914				29.1	%
Interest	4,800				5,316				(516		)		(9.7	)%
Brokerage commissions and other revenues, net	3,680				960				2,720				283.3	%
Total Revenues	287,330				257,975				29,355				11.4	%
EXPENSES:
Property operating and maintenance	57,909				51,630				6,279				12.2	%
Real estate taxes	15,330				13,836				1,494				10.8	%
Cost of home sales	29,277				26,571				2,706				10.2	%
Rental home operating and maintenance	4,788				5,227				(439		)		(8.4	)%
Ancillary expenses	7,101				5,383				1,718				31.9	%
Home selling expenses	3,324				3,290				34				1.0	%
General and administrative	21,887				19,757				2,130				10.8	%
Catastrophic weather related charges, net	782				(2,213		)		2,995				(135.3	)%
Depreciation and amortization	76,556				66,437				10,119				15.2	%
Loss on extinguishment of debt	653				196				457				233.2	%
Interest	34,014				31,138				2,876				9.2	%
Interest on mandatorily redeemable preferred OP units / equity	1,094				619				475				76.7	%
Total Expenses	252,715				221,871				30,844				13.9	%
Income Before Other Items	34,615				36,104				(1,489		)		(4.1	)%
Remeasurement of marketable securities	267				—				267				N/A
Other income / (expense), net (6)	1,898				(2,617		)		4,515				172.5	%
Income / (loss) from nonconsolidated affiliates	344				(59		)		403				683.1	%
Current tax expense	(214		)		(174		)		(40		)		(23.0	)%
Deferred tax benefit	217				347				(130		)		(37.5	)%
Net Income	37,127				33,601				3,526				10.5	%
Less: Preferred return to preferred OP units / equity	(1,323		)		(1,080		)		(243		)		22.5	%
Less: Amounts attributable to noncontrolling interests	(1,041		)		(2,094		)		1,053				(50.3	)%
Net Income Attributable to Sun Communities, Inc.	34,763				30,427				4,336				14.3	%
Less: Preferred stock distribution	(432		)		(441		)		9				(2.0	)%
Net Income Attributable to Sun Communities, Inc. Common Stockholders	$	34,331			$	29,986			$	4,345			14.5	%
Weighted average common shares outstanding:
Basic	85,520				78,855				6,665				8.5	%
Diluted	86,033				79,464				6,569				8.3	%
Earnings per share:
Basic	$	0.40			$	0.38			$	0.02			5.3	%
Diluted	$	0.40			$	0.38			$	0.02			5.3	%

 

Outstanding Securities and Capitalization 
(amounts in thousands except for *)

Outstanding Securities - As of March 31, 2019
	Number of Units/Shares Outstanding		Conversion Rate*		If Converted		Issuance Price per unit*			Annual Distribution Rate*
Convertible Securities
Series A-1 preferred OP units	328		2.4390		800		$	100		6.0	%
Series A-3 preferred OP units	40		1.8605		74		$	100		4.5	%
Series A-4 preferred OP units	410		0.4444		182		$	25		6.5	%
Series C preferred OP units	314		1.1100		349		$	100		4.5	%
Series D preferred OP units	489		0.8000		391		$	100		3.8	%
Common OP units	2,719		1.0000		2,719		N/A			Mirrors common shares distributions
Series A-4 preferred stock	1,063		0.4444		472		$	25		6.5	%
Non-Convertible Securities
Common shares	86,463		N/A		N/A		N/A			$3.00^
^ Annual distribution is based on the last quarterly distribution annualized.

 

Capitalization - As of March 31, 2019
Equity		Shares			Share Price*				Total
Common shares		86,463			$	118.52			$	10,247,595
Common OP units		2,719			$	118.52			322,256
Subtotal		89,182							$	10,569,851
Series A-1 preferred OP units		800			$	118.52			94,816
Series A-3 preferred OP units		74			$	118.52			8,770
Series A-4 preferred OP units		182			$	118.52			21,571
Series C preferred OP units		349			$	118.52			41,363
Series D preferred OP units		391			$	118.52			46,341
Total diluted shares outstanding		90,978							$	10,782,712
Debt
Mortgage loans payable									$	2,879,017
Secured borrowings (4)									102,676
Preferred Equity - Sun NG Resorts - mandatorily redeemable									35,249
Preferred OP units - mandatorily redeemable									34,663
Lines of credit (5)									396,512
Total debt									$	3,448,117
Preferred
Series A-4 preferred stock		1,063			$	25.00			$	26,575
Total Capitalization									$	14,257,404

 

Reconciliations to Non-GAAP Financial Measures

 

Reconciliation of Net Income Attributable to Sun Communities, Inc. Common Stockholders to FFO
(amounts in thousands except for per share data)

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	Three Months Ended  March 31,
	2019				2018
Net income attributable to Sun Communities, Inc. common stockholders:	$	34,331			$	29,986
Adjustments:
Depreciation and amortization	76,712				66,646
Remeasurement of marketable securities	(267		)		—
Amounts attributable to noncontrolling interests	723				1,889
Preferred return to preferred OP units	527				553
Preferred distribution to Series A-4 preferred stock	432				441
Gain on disposition of assets, net	(5,679		)		(4,539		)
FFO attributable to Sun Communities, Inc. common stockholders and dilutive convertible securities (1) (7)	$	106,779			$	94,976
Adjustments:
Other acquisition related costs (8)	160				135
Loss on extinguishment of debt	653				196
Catastrophic weather related charges, net	782				(2,213		)
Loss of earnings - catastrophic weather related (9)	—				325
Other (income) / expense (6)	(1,898		)		2,617
Debt premium write-off	—				(782		)
Deferred tax benefit	(217		)		(347		)
Core FFO attributable to Sun Communities, Inc. common stockholders and dilutive convertible securities (1) (7)	$	106,259			$	94,907
Weighted average common shares outstanding - basic:	85,520				78,855
Add:
Common stock issuable upon conversion of stock options	1				2
Restricted stock	512				607
Common OP units	2,722				2,741
Common stock issuable upon conversion of Series A-4 preferred stock	472				482
Common stock issuable upon conversion of Series A-3 preferred OP units	75				75
Common stock issuable upon conversion of Series A-1 preferred OP units	803				836
Weighted average common shares outstanding - fully diluted	90,105				83,598
FFO attributable to Sun Communities, Inc. common stockholders and dilutive convertible securities (1) (7) per share - fully diluted	$	1.19			$	1.14
Core FFO attributable to Sun Communities, Inc. common stockholders and dilutive convertible securities (1) (7) per share - fully diluted	$	1.18			$	1.14

 

Reconciliation of Net Income Attributable to Sun Communities, Inc. Common Stockholders to Recurring EBITDA
(amounts in thousands)

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	Three Months Ended  March 31,
	2019				2018
Net income attributable to Sun Communities, Inc., common stockholders:	$	34,331			$	29,986
Adjustments:
Interest expense	35,108				31,757
Loss on extinguishment of debt	653				196
Current tax expense	214				174
Deferred tax benefit	(217		)		(347		)
(Income) / loss from nonconsolidated affiliates	(344		)		59
Depreciation and amortization	76,556				66,437
Gain on disposition of assets, net	(5,679		)		(4,539		)
EBITDAre (1)	$	140,622			$	123,723
Adjustments:
Remeasurement of marketable securities	(267		)		—
Other (income) / expense, net (6)	(1,898		)		2,617
Catastrophic weather related charges, net	782				(2,213		)
Preferred return to preferred OP units / equity	1,323				1,080
Amounts attributable to noncontrolling interests	1,041				2,094
Preferred stock distribution	432				441
Plus: Gain on dispositions of assets, net	5,679				4,539
Recurring EBITDA (1)	$	147,714			$	132,281

Reconciliation of Net Income Attributable to Sun Communities, Inc. Common Stockholders to NOI
(amounts in thousands)

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	Three Months Ended  March 31,
	2019				2018
Net income attributable to Sun Communities, Inc., common stockholders:	$	34,331			$	29,986
Other revenues	(8,480		)		(6,276		)
Home selling expenses	3,324				3,290
General and administrative	21,887				19,757
Catastrophic weather related charges, net	782				(2,213		)
Depreciation and amortization	76,556				66,437
Loss on extinguishment of debt	653				196
Interest expense	35,108				31,757
Remeasurement of marketable securities	(267		)		—
Other (income) / expense, net (6)	(1,898		)		2,617
(Income) / loss from nonconsolidated affiliates	(344		)		59
Current tax expense	214				174
Deferred tax benefit	(217		)		(347		)
Preferred return to preferred OP units / equity	1,323				1,080
Amounts attributable to noncontrolling interests	1,041				2,094
Preferred stock distribution	432				441
NOI(1) / Gross Profit	$	164,445			$	149,052

 

	Three Months Ended  March 31,
	2019				2018
Real Property NOI (1)	$	143,540			$	131,745
Rental Program NOI (1)	26,061				24,102
Home Sales NOI (1) / Gross Profit	10,341				8,329
Ancillary NOI (1) / Gross Profit	1,381				1,185
Site rent from Rental Program (included in Real Property NOI) (1)(10)	(16,878		)		(16,309		)
NOI (1) / Gross profit	$	164,445			$	149,052

Non-GAAP and Other Financial Measures

 

Financial and Operating Highlights                                                                                                           
(amounts in thousands, except for *)

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	Quarter Ended
	3/31/2019				12/31/2018				9/30/2018				6/30/2018				3/31/2018
FINANCIAL INFORMATION
Total revenues	$	287,330			$	274,004			$	323,538			$	271,426			$	257,975
Net income	37,127				10,672				51,715				24,170				33,601
Net income attributable to Sun Communities Inc.	34,331				9,039				46,060				20,408				29,986
Earnings per share basic*	$	0.40			$	0.11			$	0.56			$	0.25			$	0.38
Earnings per share diluted*	0.40				0.11				0.56				0.25				0.38
Cash distributions declared per common share*	$	0.75			$	0.71			$	0.71			$	0.71			$	0.71
Recurring EBITDA (1)	$	147,714			$	133,669			$	158,153			$	128,798			$	132,281
FFO attributable to Sun Communities, Inc. common stockholders and dilutive convertible securities (1) (7)	106,779				88,562				117,018				85,623				94,976
Core FFO attributable to Sun Communities, Inc. common stockholders and dilutive convertible securities (1) (7)	106,259				92,695				116,959				90,372				94,907
FFO attributable to Sun Communities, Inc. common stockholders and dilutive convertible securities (1) (7) per share - fully diluted*	$	1.19			$	0.98			$	1.35			$	1.02			$	1.14
Core FFO attributable to Sun Communities, Inc. common stockholders and dilutive convertible securities (1) (7) per share - fully diluted*	1.18				1.03				1.35				1.07				1.14
BALANCE SHEETS
Total assets	$	7,098,662			$	6,710,026			$	6,653,726			$	6,492,348			$	6,149,653
Total debt	3,448,117				3,124,303				3,004,929				3,364,081				3,129,440
Total liabilities	3,846,325				3,479,112				3,367,285				3,736,621				3,471,096

 

	Quarter Ended
	3/31/2019			12/31/2018			9/30/2018			6/30/2018			3/31/2018
OPERATING INFORMATION*
New home sales	125			140			146			134			106
Pre-owned home sales	673			738			825			809			731
Total homes sold	798			878			971			943			837
Communities	379			371			370			367			350
Developed sites	112,175			108,963			108,142			107,192			106,617
Transient RV sites	20,173			19,491			19,432			19,007			15,693
Total sites	132,348			128,454			127,574			126,199			122,310
MH occupancy	95.4	%		95.0	%		94.9	%		95.0	%		94.7	%
RV occupancy	100.0	%		100.0	%		100.0	%		100.0	%		100.0	%
Total blended MH and RV occupancy	96.4	%		96.1	%		96.1	%		96.1	%		95.8	%

Debt Analysis
(amounts in thousands)

---

 

	Quarter Ended
	3/31/2019				12/31/2018				9/30/2018				6/30/2018				3/31/2018
DEBT OUTSTANDING
Mortgage loans payable	$	2,879,017			$	2,815,957			$	2,819,225			$	2,636,847			$	2,826,225
Secured borrowings (4)	102,676				107,731				113,089				118,242				124,077
Preferred Equity - Sun NG Resorts - mandatorily redeemable	35,249				35,277				35,277				35,277				—
Preferred OP units - mandatorily redeemable	34,663				37,338				37,338				37,338				37,338
Lines of credit (5)	396,512				128,000				—				536,377				141,800
Total debt	$	3,448,117			$	3,124,303			$	3,004,929			$	3,364,081			$	3,129,440
% FIXED/FLOATING
Fixed	88.5		%		95.9		%		100.0		%		84.0		%		90.6		%
Floating	11.5		%		4.1		%		—		%		16.0		%		9.4		%
Total	100.0		%		100.0		%		100.0		%		100.0		%		100.0		%
WEIGHTED AVERAGE INTEREST RATES
Mortgage loans payable	4.24		%		4.22		%		4.23		%		4.27		%		4.25		%
Preferred Equity - Sun NG Resorts - mandatorily redeemable	6.00		%		6.00		%		6.00		%		6.00		%		—		%
Preferred OP units - mandatorily redeemable	6.50		%		6.61		%		6.61		%		6.61		%		6.61		%
Lines of credit (5)	3.73		%		3.77		%		—		%		3.31		%		3.01		%
Average before Secured borrowings (4)	4.22		%		4.25		%		4.28		%		4.15		%		4.22		%
Secured borrowings (4)	9.94		%		9.94		%		9.95		%		9.96		%		9.97		%
Total average	4.39		%		4.45		%		4.40		%		4.36		%		4.45		%
DEBT RATIOS
Net Debt / Recurring EBITDA (1) (TTM)	6.0				5.6				5.4				6.5				6.2
Net Debt / Enterprise Value	24.1		%		25.2		%		24.1		%		28.6		%		28.8		%
Net Debt / Gross Assets	39.8		%		37.7		%		35.9		%		42.7		%		41.9		%
COVERAGE RATIOS
Recurring EBITDA (1) (TTM) / Interest	4.1				4.0				3.9				3.7				3.6
Recurring EBITDA (1) (TTM) / Interest + Pref. Distributions + Pref. Stock Distribution	3.9				3.9				3.8				3.6				3.4

 

MATURITIES/PRINCIPAL AMORTIZATION NEXT FIVE YEARS	Remaining 2019				2020				2021				2022				2023
Mortgage loans payable:
Maturities	$	—			$	58,078			$	270,680			$	82,155			$	307,465
Weighted average rate of maturities	—		%		5.92		%		5.53		%		4.46		%		4.17		%
Principal amortization	44,099				59,931				59,173				57,182				53,829
Secured borrowings (4)	3,846				5,547				5,956				6,154				6,154
Preferred Equity - Sun NG Resorts - mandatorily redeemable	—				—				—				35,249				—
Lines of credit (5)	—				3,512				393,000				—				—
Total	$	47,945			$	127,068			$	728,809			$	180,740			$	367,448

 

Real Property Operations – Same Community⁽²⁾                                                     
(amounts in thousands except for Other Information)

---

 

	Three Months Ended March 31,
	2019				2018				Change				% Change
Financial Information
Income from real property (11)	$	199,084			$	187,826			$	11,258			6.0	%
Property Operating Expenses:
Payroll and benefits	16,421				15,534				887				5.7	%
Legal, taxes & insurance	2,191				2,471				(280		)		(11.3	)%
Utilities (11)	14,434				14,463				(29		)		(0.2	)%
Supplies and repair (12)	5,719				5,159				560				10.9	%
Other	4,455				4,688				(233		)		(5.0	)%
Real estate taxes	14,590				13,766				824				6.0	%
Total property operating expenses	57,810				56,081				1,729				3.1	%
Real Property NOI(1)	$	141,274			$	131,745			$	9,529			7.2	%

 

	As of March 31,
	2019				2018				Change				% Change
Other Information
Number of properties	345				345				—
MH occupancy (3)	97.6		%
RV occupancy (3)	100.0		%
MH & RV blended occupancy % (3)	98.2		%		96.1		%		2.1		%
Sites available for development	7,296				7,602				(306		)		(4.0	)%
Monthly base rent per site - MH	$	565			$	543			$	22			4.1	%	(14)
Monthly base rent per site - RV (13)	$	457			$	434			$	23			5.3	%	(14)
Monthly base rent per site - Total (13)	$	541			$	519			$	22			4.2	%	(14)

Home Sales Summary           
(amounts in thousands except for *)

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	Three Months Ended March 31,
Financial Information	2019				2018				Change				% Change
Revenue:
New home sales	$	15,381			$	11,893			$	3,488			29.3	%
Pre-owned home sales	24,237				23,007				1,230				5.3	%
Revenue from home sales	39,618				34,900				4,718				13.5	%
Expenses:
New home cost of sales	13,146				10,197				2,949				28.9	%
Pre-owned home cost of sales	16,131				16,374				(243		)		(1.5	)%
Cost of home sales	29,277				26,571				2,706				10.2	%
NOI / Gross Profit (1)	$	10,341			$	8,329			$	2,012			24.2	%
Gross profit – new homes	$	2,235			$	1,696			$	539			31.8	%
Gross margin % – new homes	14.5		%		14.3		%		0.2		%
Average selling price – new homes*	$	123,048			$	112,198			$	10,850			9.7	%
Gross profit – pre-owned homes	$	8,106			$	6,633			$	1,473			22.2	%
Gross margin % – pre-owned homes	33.4		%		28.8		%		4.6		%
Average selling price – pre-owned homes*	$	36,013			$	31,473			$	4,540			14.4	%
Statistical Information
New home sales volume*	125				106				19				17.9	%
Pre-owned home sales volume*	673				731				(58		)		(7.9	)%
Total homes sold*	798				837				(39		)		(4.7	)%

               

 

Rental Program Summary    
(amounts in thousands except for *)

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		Three Months Ended March 31,
Financial Information		2019				2018				Change				% Change
Revenues:
Rental home revenue		$	13,971			$	13,020			$	951			7.3	%
Site rent included in Income from real property		16,878				16,309				569				3.5	%
Rental program revenue		30,849				29,329				1,520				5.2	%
Expenses:
Repairs and refurbishment		2,304				2,314				(10		)		(0.4	)%
Taxes and insurance		1,864				1,546				318				20.6	%
Other		620				1,367				(747		)		(54.6	)%
Rental program operating and maintenance		4,788				5,227				(439		)		(8.4	)%
Rental Program NOI(1)		$	26,061			$	24,102			$	1,959			8.1	%

 

		As of March 31,
Other Information		2019				2018				Change				% Change
Number of occupied rental homes, end of period*		11,170				11,074				96				0.9	%
Investment in occupied rental homes, end of period		$	547,844			$	504,402			$	43,442			8.6	%
Number of sold rental homes (YTD)*		210				234				(24		)		(10.3	)%
Weighted average monthly rental rate, end of period*		$	963			$	913			$	50			5.5	%

Acquisitions and Other Summary ⁽¹⁵⁾
(amounts in thousands except for statistical data)

---

 

			Three Months Ended  March 31, 2019
REVENUES:
Income from real property			$	9,251
PROPERTY AND OPERATING EXPENSES:
Payroll and benefits			2,450
Legal, taxes & insurance			193
Utilities(11)			1,550
Supplies and repair			635
Other			1,417
Real estate taxes			740
Property operating expenses			6,985
NET OPERATING INCOME (NOI) (1)			$	2,266
			As of March 31, 2019
Other information:
Number of properties			34
Occupied sites			3,699
Developed sites			3,893
Occupancy %			95.0		%
Transient sites			5,189

Property Summary
(includes MH and Annual RVs)
COMMUNITIES		3/31/2019			12/31/2018			9/30/2018			6/30/2018			3/31/2018
FLORIDA
Communities		125			124			124			124			123
Developed sites (16)		38,878			37,874			37,879			37,723			37,726
Occupied (16)		37,932			36,868			36,822			36,602			36,546
Occupancy % (16)		97.6	%		97.3	%		97.2	%		97.0	%		96.9	%
Sites for development		1,754			1,684			1,494			1,335			1,397
MICHIGAN
Communities		72			70			70			69			68
Developed sites (16)		27,777			26,504			26,116			26,039			25,881
Occupied (16)		26,430			25,075			24,830			24,709			24,319
Occupancy % (16)		95.2	%		94.6	%		95.1	%		94.9	%		94.0	%
Sites for development		1,202			1,202			1,533			1,668			1,371
TEXAS
Communities		23			23			23			23			21
Developed sites (16)		6,953			6,922			6,905			6,622			6,614
Occupied (16)		6,529			6,428			6,301			6,251			6,191
Occupancy % (16)		93.9	%		92.9	%		91.3	%		94.4	%		93.6	%
Sites for development		1,107			1,121			907			1,168			1,100
CALIFORNIA
Communities		31			30			30			29			27
Developed sites (16)		5,949			5,941			5,932			5,694			5,692
Occupied (16)		5,902			5,897			5,881			5,647			5,646
Occupancy % (16)		99.2	%		99.3	%		99.1	%		99.2	%		99.2	%
Sites for development		56			56			59			177			389
ARIZONA
Communities		13			12			11			11			11
Developed sites (16)		4,238			3,836			3,826			3,804			3,797
Occupied (16)		3,830			3,545			3,515			3,485			3,468
Occupancy % (16)		90.4	%		92.4	%		91.9	%		91.6	%		91.3	%
Sites for development		—			—			—			—			—
ONTARIO, CANADA
Communities		15			15			15			15			15
Developed sites (16)		3,832			3,845			3,832			3,752			3,650
Occupied (16)		3,832			3,845			3,832			3,752			3,650
Occupancy % (16)		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%
Sites for development		1,675			1,682			1,662			1,662			1,664
INDIANA
Communities		11			11			11			11			11
Developed sites (16)		3,089			3,089			3,089			3,089			3,048
Occupied (16)		2,823			2,772			2,778			2,791			2,785
Occupancy % (16)		91.4	%		89.7	%		89.9	%		90.4	%		91.4	%
Sites for development		277			277			277			277			318
OHIO
Communities		9			9			9			9			9
Developed sites (16)		2,770			2,770			2,770			2,767			2,756
Occupied (16)		2,704			2,693			2,694			2,698			2,672
Occupancy % (16)		97.6	%		97.2	%		97.3	%		97.5	%		97.0	%
Sites for development		59			59			59			59			75
COLORADO
Communities		8			8			8			8			8
Developed sites (16)		2,335			2,335			2,335			2,335			2,335
Occupied (16)		2,323			2,320			2,313			2,319			2,327
Occupancy % (16)		99.5	%		99.4	%		99.1	%		99.3	%		99.7	%
Sites for development		2,129			2,129			2,129			1,819			650
OTHER STATES
Communities		72			69			69			68			57
Developed sites (16)		16,354			15,847			15,458			15,367			15,118
Occupied (16)		15,826			15,323			14,932			14,786			14,544
Occupancy % (16)		96.8	%		96.7	%		96.6	%		96.2	%		96.2	%
Sites for development		2,987			3,048			3,195			3,233			2,381
TOTAL - PORTFOLIO
Communities		379			371			370			367			350
Developed sites (16)		112,175			108,963			108,142			107,192			106,617
Occupied (16)		108,131			104,766			103,898			103,040			102,148
Occupancy % (16)		96.4	%	(17)	96.1	%		96.1	%		96.1	%		95.8	%
Sites for development (18)		11,246			11,258			11,315			11,398			9,345
% Communities age restricted		31.7	%		32.1	%		32.2	%		32.2	%		33.7	%
TRANSIENT RV PORTFOLIO SUMMARY
Location
Florida		5,650			5,917			5,786			5,942			5,870
California		1,975			1,765			1,774			1,377			806
Texas		1,717			1,752			1,758			1,776			1,360
Arizona		1,421			1,423			1,057			1,079			1,085
Maryland		1,375			1,381			1,386			1,386			1,155
Ontario, Canada		1,131			1,046			1,056			1,133			1,234
New York		929			925			910			928			610
New Jersey		906			884			893			906			931
Maine		857			572			578			591			591
Michigan		611			576			629			350			256
Indiana		519			519			519			519			519
Other locations		3,082			2,731			3,086			3,020			1,276
Total transient RV sites		20,173			19,491			19,432			19,007			15,693

Capital Improvements, Development, and Acquisitions   
(amounts in thousands except for *)

---

 

	Recurring Capital Expenditures Average/Site*			Recurring Capital Expenditures (19)			Lot Modifications (20)			Acquisitions (21)			Expansion & Development (22)			Revenue Producing (23)
YTD 2019	$	53		$	5,296		$	5,587		$	328,700		$	51,157		$	2,803
2018	$	263		$	24,265		$	22,867		$	414,840		$	152,672		$	3,864
2017	$	214		$	14,166		$	18,049		$	204,375		$	88,331		$	1,990

Operating Statistics for MH and Annual RVs

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LOCATIONS		Resident Move-outs			Net Leased Sites (24)			New Home Sales			Pre-owned Home Sales			Brokered  Re-sales
Florida		281			348			59			56			342
Michigan		197			111			15			324			30
Ontario, Canada		301			(13	)		3			2			13
Texas		61			101			11			77			14
Arizona		11			16			11			1			54
Indiana		13			51			2			82			4
Ohio		48			11			—			38			—
California		12			5			5			—			14
Colorado		—			3			6			19			8
Other locations		426			(62	)		13			74			21
Three Months Ended March 31, 2019		1,350			571			125			673			500

 

TOTAL FOR YEAR ENDED		Resident Move-outs			New Leased Sites (24)			New Home Sales			Pre-owned Home Sales			Brokered  Re-sales
2018		3,435			2,600			526			3,103			2,147
2017		2,739			2,406			362			2,920			2,006

 

PERCENTAGE TRENDS		Resident Move-outs			Resident  Re-sales
2019 (TTM)		2.5	%		7.2	%
2018		2.4	%		7.2	%
2017		1.9	%		6.6	%

 

Footnotes and Definitions                                                                

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(1)Investors in and analysts following the real estate industry utilize funds from operations (“FFO”), net operating income (“NOI”), and earnings before interest, tax, depreciation and amortization (“EBITDA”) as supplemental performance measures. The Company believes that FFO, NOI, and EBITDA are appropriate measures given their wide use by and relevance to investors and analysts. Additionally, FFO, NOI, and EBITDA are commonly used in various ratios, pricing multiples, yields and returns and valuation calculations used to measure financial position, performance and value.

•   FFO, reflecting the assumption that real estate values rise or fall with market conditions, principally adjusts for the effects of generally accepted accounting principles (“GAAP”) depreciation and amortization of real estate assets. 

•   NOI provides a measure of rental operations that does not factor in depreciation, amortization and non-property specific expenses such as general and administrative expenses. 

•   EBITDA provides a further measure to evaluate ability to incur and service debt and to fund dividends and other cash needs.

FFO is defined by the National Association of Real Estate Investment Trusts (“NAREIT”) as GAAP net income (loss), excluding gains (or losses) from sales of depreciable operating property, plus real estate-related depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. FFO is a non-GAAP financial measure that management believes is a useful supplemental measure of the Company’s operating performance. By excluding gains and losses related to sales of previously depreciated operating real estate assets, impairment and excluding real estate asset depreciation and amortization (which can vary among owners of identical assets in similar condition based on historical cost accounting and useful life estimates), FFO provides a performance measure that, when compared period-over-period, reflects the impact to operations from trends in occupancy rates, rental rates, and operating costs, providing perspective not readily apparent from GAAP net income (loss). Management believes the use of FFO has been beneficial in improving the understanding of operating results of REITs among the investing public and making comparisons of REIT operating results more meaningful. The Company also uses FFO excluding certain gain and loss items that management considers unrelated to the operational and financial performance of our core business (“Core FFO”). The Company believes that Core FFO provides enhanced comparability for investor evaluations of period-over-period results.

The Company believes that GAAP net income (loss) is the most directly comparable measure to FFO. The principal limitation of FFO is that it does not replace GAAP net income (loss) as a performance measure or GAAP cash flow from operations as a liquidity measure. Because FFO excludes significant economic components of GAAP net income (loss) including depreciation and amortization, FFO should be used as a supplement to GAAP net income (loss) and not as an alternative to it. Further, FFO is not intended as a measure of a REIT’s ability to meet debt principal repayments and other cash requirements, nor as a measure of working capital. FFO is calculated in accordance with the Company’s interpretation of standards established by NAREIT, which may not be comparable to FFO reported by other REITs that interpret the NAREIT definition differently.

NOI is derived from revenues minus property operating expenses and real estate taxes. NOI is a non-GAAP financial measure that the Company believes is helpful to investors as a supplemental measure of operating performance because it is an indicator of the return on property investment, and provides a method of comparing property performance over time. The Company uses NOI as a key measure when evaluating performance and growth of particular properties and/or groups of properties. The principal limitation of NOI is that it excludes depreciation, amortization, interest expense and non-property specific expenses such as general and administrative expenses, all of which are significant costs. Therefore, NOI is a measure of the operating performance of the properties of the Company rather than of the Company overall.

The Company believes that GAAP net income (loss) is the most directly comparable measure to NOI. NOI should not be considered to be an alternative to GAAP net income (loss) as an indication of the Company’s financial performance or GAAP cash flow from operating activities as a measure of the Company’s liquidity; nor is it indicative of funds available for the Company’s cash needs, including its ability to make cash distributions. Because of the inclusion of items such as interest, depreciation, and amortization, the use of GAAP net income (loss) as a performance measure is limited as these items may not accurately reflect the actual change in market value of a property, in the case of depreciation and in the case of interest, may not necessarily be linked to the operating performance of a real estate asset, as it is often incurred at a parent company level and not at a property level.

EBITDA as defined by NAREIT (referred to as “EBITDAre”) is calculated as GAAP net income (loss), plus interest expense, plus income tax expense, plus depreciation and amortization, plus or minus losses or gains on the disposition of depreciated property (including losses or gains on change of control), plus impairment write-downs of depreciated property and of investments in unconsolidated affiliates caused by a decrease in value of depreciated property in the affiliate, and adjustments to reflect the entity’s share of EBITDAre of unconsolidated affiliates. EBITDAre is a non-GAAP financial measure that the Company uses to evaluate its ability to incur and service debt, fund dividends and other cash needs and cover fixed costs. Investors utilize EBITDAre as a supplemental measure to evaluate and compare investment quality and enterprise value of REITs. The Company also uses EBITDAre excluding certain gain and loss items that management considers unrelated to measurement of the Company’s performance on a basis that is independent of capital structure (“Recurring EBITDA”).

The Company believes that GAAP net income (loss) is the most directly comparable measure to EBITDAre. EBITDAre is not intended to be used as a measure of the Company’s cash generated by operations or its dividend-paying capacity, and should therefore not replace GAAP net income (loss) as an indication of the Company’s financial performance or GAAP cash flow from operating, investing and financing activities as measures of liquidity.

(2)  Same Community results reflect constant currency for comparative purposes. Canadian currency figures in the prior comparative period have been translated at 2019 actual exchange rates.

(3)  The Same Community occupancy percentage for 2019 is derived from 106,386 developed sites, of which 104,432 were occupied. The number of developed sites excludes RV transient sites and approximately 1,900 recently completed but vacant MH expansion sites. Without the adjustment for vacant expansion sites, the Same Community occupancy percentage is 95.4 percent for MH, 100.0 percent for RV, and 96.4 percent for the blended MH and RV. The MH and RV blended occupancy is derived from 108,282 developed sites, of which 104,432 were occupied. The Same Community occupancy percentage for 2018 has been adjusted to reflect incremental period-over-period growth from filled expansion sites and the conversion of transient RV sites to annual RV sites.

(4)  This is a transferred asset transaction which has been classified as collateralized receivables and the cash received from this transaction has been classified as a secured borrowing. The interest income and interest expense accrue at the same rate and amount.

(5)  Lines of credit includes the Company’s MH floor plan facility. The effective interest rate on the MH floor plan facility was 7.0 percent for all periods presented. However, the Company pays no interest if the floor plan balance is repaid within 60 days.

(6)   Other income / (expense), net was as follows (in thousands):

	Three Months Ended March 31,
	2019				2018
Foreign currency translation gain / (loss)	$	1,969			$	(2,524	)
Contingent liability remeasurement (loss) / gain	(71		)		(93		)
Other income / (expense), net	$	1,898			$	(2,617	)

(7)  The effect of certain anti-dilutive convertible securities is excluded from these items.

(8)   These costs represent the expenses incurred to bring recently acquired properties up to the Company’s operating standards, including items such as tree trimming and painting costs that do not meet the Company’s capitalization policy.

(9)   We recorded a total estimated income of $0.3 million in the Core FFO⁽¹⁾ during the first quarter ending March 31, 2018 for the income related to the loss of earnings in excess of the applicable business interruption deductible in relation to our Florida Keys communities. The estimated income was not recorded within our consolidated financial statements during that period in accordance with GAAP. The income was recognized in the fourth quarter of 2018. During the three months ended March 31, 2019, we recorded GAAP income of $0.4 million from business interruption coverage upon notification of payment by the insurance company.

(10) The renter’s monthly payment includes the site rent and an amount attributable to the home lease. Site rent is reflected in Real Property NOI. For purposes of management analysis, site rent is included in Rental Program revenue to evaluate the incremental revenue gains associated with implementation of the Rental Program, and to assess the overall growth and performance of the Rental Program and financial impact on the Company’s operations.

(11) Same Community results net $8.4 million and $8.1 million of utility revenue against the related utility expense in property operating and maintenance expense for the three months ended March 31, 2019 and 2018, respectively. The Company adopted ASC 842, the new leasing standard, as of January 1, 2019 which required the reclassification of bad debt expense from Property operating expense to Income from real property. To assist with comparability within Same Community results, bad debt expense has been reclassified to be shown as a reduction of Income from real property for all periods presented.

(12) Same Community supplies and repair expense excludes $0.1 million for the three months ended March 31, 2018 of expenses incurred for recently acquired properties to bring the properties up to the Company’s operating standards, including items such as tree trimming and painting costs that do not meet the Company’s capitalization policy.

(13) Monthly base rent per site pertains to annual RV sites and excludes transient RV sites.

(14) Calculated using actual results without rounding.

(15) Acquisitions and other is comprised of seven properties acquired and one property being operated under a temporary use permit in 2019, twenty properties acquired in 2018, three Florida Keys properties that require redevelopment as a result of damage sustained from Hurricane Irma in 2017, one recently opened ground-up development, one property undergoing redevelopment, one property that we have an interest in, but do not operate, and other miscellaneous transactions and activity.

(16) Includes MH and annual RV sites, and excludes transient RV sites, as applicable.

(17) As of March 31, 2019, total portfolio MH occupancy was 95.4 percent (including the impact of approximately 1,900 recently constructed but vacant MH expansion sites) and annual RV occupancy was 100.0 percent.

(18) Total sites for development were comprised of approximately 71.7 percent for expansion, 23.3 percent for greenfield development and 5.0 percent for redevelopment.

(19) Recurring capital expenditures are necessary to maintain asset quality, including purchasing and replacing assets used to operate the community. These capital expenditures include items such as: major road, driveway, pool improvements; clubhouse renovations; adding or replacing street lights; playground equipment; signage; maintenance facilities; manager housing and property vehicles. The minimum capitalized amount is five hundred dollars.

(20) Lot modification capital expenditures improve the asset quality of the community. These costs are incurred when an existing older home moves out, and the site is prepared for a new home, more often than not, a multi-sectional home.  These activities, which are mandated by strict manufacturer’s installation requirements and state building code, include items such as new foundations, driveways, and utility upgrades.

(21) Capital expenditures related to acquisitions represent the purchase price of existing operating communities and land parcels to develop expansions or new communities. These costs for the three months ended March 31, 2019 include $12.4 million of capital improvements identified during due diligence that are necessary to bring the communities to the Company’s operating standards.  For the years ended December 31, 2018 and 2017, these costs were $94.6 million and $84.0 million, respectively. These include items such as: upgrading clubhouses; landscaping; new street light systems; new mail delivery systems; pool renovation including larger decks, heaters, and furniture; new maintenance facilities; and new signage including main signs and internal road signs. These are considered acquisition costs and although identified during due diligence, often require 24 to 36 months after closing to complete.

(22) Expansion and development expenditures consist primarily of construction costs and costs necessary to complete home site improvements, such as driveways, sidewalks and landscaping.

(23) Capital costs related to revenue generating activities consist primarily of garages, sheds, sub-metering of water, sewer and electricity. Revenue generating attractions at our RV resorts are also included here and, occasionally, a special capital project requested by residents and accompanied by an extra rental increase will be classified as revenue producing.

(24) Net leased sites do not include occupied sites acquired during that year.

        Certain financial information has been revised to reflect reclassifications in prior periods to conform to current period presentation.

 

Attachment

• 1st Quarter 2019 Press Release and Supplemental